7/23/2009 @ 5:51PM

What To Know About The Health Care Debate

In a press conference on Wednesday evening, President Obama defended efforts to reform health care (See “Punting on Paying for Health Care“). Criticizing the status quo as the “devil” Americans know, he argued that health care inflation is a threat to the country’s global competitiveness and economic future.

That much both parties can agree on. The rest of it–particularly the hot-button topics of cost, coverage, funding, taxes and improving value–has sparked fierce arguments over ideology and governance.

To help you better navigate the sprawling and complex debate, here’s our primer on the issues driving reform. Please return for updates.

Cost

Annual total health costs have reached $2 trillion and were expected to rise by twice the rate of inflation in 2008. According to the Kaiser Family Foundation, the average annual premium for an employer health plan that covers a family of four was $12,700 in 2008, a 5% increase from the previous year.

Yet, consumers have little to show for the sharp increase. While premiums have increased, employer-sponsored benefits have been pared back by companies that are trying to shed costs.

The economy also can’t sustain the rapid increase in health care inflation. Total spending now accounts for 16% of the country’s gross domestic product; the Congressional Budget Office estimates it will reach 48% by 2050 if uncorrected.

Coverage

The debate over health reform revolves around two central principles: driving down costs and providing coverage to an estimated 47 million uninsured Americans. Though the two seem unrelated, advocates of universal coverage argue that providing coverage will nearly eliminate uncompensated care and thereby decrease premiums.

The president and many Democratic members of Congress support creating a government-run public plan, which would provide coverage to the uninsured. Those who prefer to keep their current insurance may do so, but everyone will be required to have insurance. Those who cannot afford to purchase it will receive subsidies from the government. Carriers will be required to cover patients despite pre-existing conditions. Providing universal coverage is estimated to cost at least $1 trillion over the next decade.

Opponents of the public plan argue that it would allow the government to set below-market rate prices and drive private insurers out of business. On Wednesday evening, Obama argued that the public plan would help keep insurance companies “honest” and “incentivize the private sector to do even better.”

Financing

Funding options include a proposal (See “ObamaCare: Who Gets Hit and How Hard“) by the House to charge the wealthy–those with incomes of $350,000 and above–a surtax of 1% and higher. Businesses with payrolls exceeding $400,000 that don’t provide coverage to employees would also be subject to a penalty equivalent to 8% of payroll. This proposal is estimated to bring in $544 billion over 10 years, about half of the cost of universal coverage.

In his budget, the president proposed paying for universal coverage by targeting waste in Medicare. He proposed adjusting reimbursement rates to physicians and hospitals and requiring private plans in the Medicare Advantage category to submit competitive bids. He also proposed limiting the value of itemized tax deductions for families who make $250,000 or more.

Taxes

Employer-based coverage is currently a tax-deductible expense for companies. If the government had taxed coverage in 2008, it would have netted $226 billion in revenue. This is a tempting funding source for universal coverage, but it remains politically controversial.

Though President Obama criticized Sen. John McCain during the campaign for supporting this policy, he recently said that he is open to reversing the exclusion in a way that doesn’t disproportionately affect middle-class families.

Improving the Value of Care

The debate over reform has largely broken down along party lines and the subject of improving care is no exception. Many Democrats believe comparative effectiveness–the practice of evaluating the efficacy of certain treatments and procedures based on clinical evidence–should be central to any reform.

The Institute of Medicine recently released a list of 100 priorities, which include comparing the effectiveness of certain biologics, treatments for lower back pain and strategies for pregnancy prevention.

Many Republicans, on the other hand, see comparative effectiveness as the gateway to the “rationing” of health care. Senate Republican leader Mitch McConnell recently said that he supported the idea of clinical research, but does not want it used to determine which treatments and procedures are accessible to Americans.

Timeline

The conventional wisdom earlier this year was that legislation would pass before the August recess. This became less realistic in late July thanks in part to resistance from Blue Dog Democrats and moderate Republicans who have pressed the issue of cost control.

The president also softened his stance on the August deadline at his press conference, saying that he would not sign a rushed bill that did not sufficiently achieve cost control. On Thursday, Senate majority leader Harry Reid announced that the Senate would not vote on a bill until after Congress reconvenes on Sept. 8.